mathjak107 wrote:
i only have long term money in equity's which at 62 is money i will not eat with for 15-30 years . so yes my time frame i only worry's about the 15-30 year block of time with the bulk in the 20-30 year range . while i rather not be down at any point in time or more than i have to be by bad investment decisions the reality is shorter term movers are not a concern . under 15 years in time really is a moot point .
Are you saying you are not intending to keep a fixed allocation (whatever it is) between now and when you're at least 77? I.e. if you have $X in stocks now and it's (say) 60% of your assets now, is your intent to keep all of this money in stocks no matter what happens between now and 15 years from now, and let it float (up and down) with the market (hopefully it doubles or triples or more) - as opposed to rebalancing back to 60% stocks periodically? And between now and when you're 77 you'll live on your other 40% whatever it's currently invested in?
With this plan, won't your overall stock allocation tend to creep up over time so when you're 77 you'll end up with (say) 85-90% stocks? What happens if stocks take a 40% hit in year 14 of this plan? Are you willing to wait another 15 years from then for the recovery? I would think you'd want to gradually reduce your stock exposure over the next 15 years rather than increase it - in which case, you'd be selling stocks (not to eat, but to re-allocate to another asset class). And, if you're selling down your stocks over the next 15 years your time horizon is distinctly less than 15 years.
my own plan stays between 50-55% and gets rebalanced as well as different types of funds are used that fit better as the picture changes. fidelity export and multinational was a good fund when the dollar was weak . it is not a good choice for a strong dollar. reits were good a few years ago to own , not so much today , etc.
when i say i don't care what happens in the short term it is in the same regard as anyone else who rebalances a portfolio with a long term view . odds are if it is equity's being sold there is a good chance it is because they are up . if they are being sold they are either up or being used to buy assets that are cheaper and will be up when it is their day in the sun. we are talking the entire portfolio especiallly if you have a low withdrawal rate .
the first question is who are you really investing your retirement portfolio for ?
is it more for your income or is it more for legacy money ?
we had a very large income from some lease rights we held on commercial property in nyc but our partner bernard spitzer decided to sell it about 1-1/2 years ago before he died.
we ended up with a pile of money i have to invest to draw a bigger income . if we didn't sell those rights to an investor group then my own portfolio would have been more legacy money for heirs then income money for us and could have been invested even more aggressively .
but even so if you could tolerate the growing equity position , then historically go for it .
but in general there are other methods of withdrawal that do not use a fixed allocation and yes stocks do rise over time , which has been fine to do throughout history .
take a bucket system. a few hold 7 years cash and safe money , 7 years bonds and income funds , all the rest equity's.
you can go up to 15 years without selling equity's. all the while as you spend down you are increasing equity allocations as cash and bonds are spent lower and lower .
but over 15 years or more there has never ever been a point you couldn't sell at a profit and refill.
while most folks refill whenever markets are up there is no reason they couldn't refill later and later although equity's allocations will increase until buckets 1 and 2 are refilled . .
another method is a rising glide path method. to avoid a market hit early on you reduce down to 30-35% equity's going in to retirement and increase 2% a year over the next 15 years .
you give up any additional gains early on but make them up later with higher equity positions after you clear the early years .
so far drawing even from 100% equity's if one had the nerve would never have been a problem in retirement as well.
once you had a first up cycle from that point on you were good to go drawing 4% inflation adjusted. the lack of drag from cash and bonds actually made each up market so powerful that it had no issues spending when markets were down .
could stocks go down and not come back up ? unlikely , but sure anything is possible.
in fact do you know we had 3 cases out of 111 rolling 30 year time frames which started off with drops and even they turned out okay so worrying about high equity positions wiping you out in retirement has just been more in folks minds than any reality to date including the great depression and 2000 and 2008 .
it isn't tha magnitude of a drop it is how fast the recovery happens.
those that retired in 2008 , stuck to the plan and got hit are just fine and in fact are right up there at this stage with all the other average outcomes we had.
the problem child is the y2k retiree , they are on par with the 1929 retiree at this point , not the worst case but they are in the range of the 4 worst time frames we had. they may become the 5th worst case scenario if things do not p/u but even so they are still on track to have their inflation adjusted 4% draw hold true but they will have one of the least amounts left over for heirs .
that gives you an idea just how hard it is for the 4% safe withdrawal figure to actually fail. what typically happens in poor markets is the amount left in the pile at the end shrinks .
no i am not saying retirees should be 100% equity's , i am only saying that even if they were they would always have been just fine . would i advocate it ? no but it is more the fear of it we have then the actual outcome from doing so .
Last edited by mathjak107 on Fri Aug 07, 2015 8:01 am, edited 1 time in total.
statistics change drastically as you weed out those who died earlier than 62 or 65 .
as you weed out those unhealthy or who died younger , the odds go higher and higher you will live longer and longer. remember too those average life expectancy figures are the 50% point meaning at that age 1/2 will be alive to go on .
if only we knew which 1/2 we were in right ? with almost a 50% chance of one of you seeing 90 in a couple those are pretty high odds.
in fact since 2000 we have been adding 1 year of life more every 4 years . so if you are basing life expectancy on a chart that starts at birth you are way off by the time you are in your 60's .
what does make sense is you use your own investing and plan to age 85 or so , then for not much money add a longevity insurance policy.
that can be a good compromise since the policy's are pretty cheap for what they pay out .
with only two possible outcomes for you statistics mean nothing . you and your spouse can only be , dead or alive . those are your only two choices .
Last edited by mathjak107 on Fri Aug 07, 2015 11:54 am, edited 1 time in total.
